Are you eligible for government loan forgiveness? About 3.5 million federal student-borrowers who work in the public sector could qualify for faster loan repayments under a temporary expansion of the PSLF program. But the window to apply for this “limited PSLF waiver” is closing.
The vast majority of borrowers who applied for PSLF were previously denied assistance, but new regulatory changes in October 2021 and again in April this year made forgiveness more accessible to more public officials – teachers, government employees, first responders and firefighters – who pledge to 10 years or more to work.
Renunciation can retrospectively open a path to forgiveness. For example, it could allow some borrowers to count their past payments against PSLF, giving them the opportunity to be re-examined if previously declined, and allowing them to earn credit for loan payments regardless of the plan.
The deadline to apply for the waiver is October 31, but some borrowers need to act earlier. If you have eligible Perkins or FFEL loans, you must first consolidate them into direct loans before submitting your application. You should consolidate your loans “by the end of the first week of September, as the consolidation process can take 45 days,” according to Martin Lynch, director of education at Cambridge Credit Counseling Corp.
If you want to know if you are eligible for credit relief under the expanded PSLF program, read on. We’ll tell you how to apply on time and what else you need to know about government loan forgiveness. More about this here.
What is the PSLF program and am I eligible?
First launched in 2007, the PSLF program was designed to help public employees pay off their loans faster.
The program works by offering loan forgiveness to eligible government employees who have made 120 qualifying student loan payments. But before the program expanded last October, it had a terrible approval rating: nearly 99% of borrowers who had applied since 2008 were rejected.
To qualify for PSLF, you must be employed full-time by a federal, state, local, or tribal government agency—including the military—or a nonprofit organization. You must have federal direct loans or other types of federally backed loans that have already been consolidated into direct loans and you must have 120 qualifying payments or 10 years of payments. Examples of borrowers who qualify for PSLF include workers such as teachers, nurses, and firefighters who serve their local communities.
Am I eligible for loan forgiveness under the new PSLF terms?
The waiver applies only to federal loans that account for the majority or greater than 90% of total student loan debt. Borrowers in government agencies may be eligible for waiver on FFEL, government-backed private lender loans, Perkins Loans, and other non-standard or non-income-based federal loan repayment schedules under the extended waiver (see below).
Borrowers can also view previous payments and periods of employment, such as e.g. active military service, for which they would not have qualified in the past.
The easiest way to find out if you qualify is to apply for the limited exemption. Completing the waiver will help you consolidate different types of loans or certify previous periods of employment on loans.
How do I apply for PSLF forgiveness?
The Department of Education has a special tool to help you apply for the limited waiver. The deadline to apply for the exemption is October 31, 2022, but the sooner you apply the better. Some borrowers may not need to do anything to have their loans canceled – but it’s a good idea to confirm your specific dates.
If you hold FFEL or Perkins loans, you must consolidate them into direct loans. This process can take several weeks, and Lynch recommends completing the process “at least 45 days before submitting the PSLF application.” This means that you should take action to consolidate no later than the first week of September to ensure you have enough time to submit.
Do I need to consolidate my non-direct loans?
Previously, only direct loans with a standard or income-based repayment schedule qualified for PSLF. However, for a limited time, regardless of your repayment schedule, you may be able to receive a credit for past payments on federal loans that were previously ineligible for PSLF. Borrowers with FFEL, Perkins and other non-direct federal loans must consolidate their loans through the direct consolidation program before applying for the PSLF extended waiver.
You can consolidate qualifying federal student loans into a direct loan online at the Federal Student Aid website – the application for consolidation can be found here. This combines your existing federal loans into one direct loan with one interest rate and one monthly payment. By consolidating them into a direct loan and then applying for enhanced PSLF forgiveness, your past payments can now count toward loan forgiveness as long as you are employed in a qualifying government service.
How does the student loan payment pause affect my PSLF eligibility?
Federal student loan payments have been suspended for over two years and are currently expiring. Under the PSLF, each such suspended payment during that time counts as a qualifying loan payment. So if your payments have been suspended for 26 months, that counts as 26 payments on time, bringing you closer to your goal of 120.
What happens if I haven’t received a credit for previous payments?
If you had made payments in the past but your credit servicer had incomplete or inaccurate records, you had almost no ability to counter their demands. With the limited waiver, you can now apply for waiver and have your payments count towards your debt and waiver.
Will the extended waiver become permanent?
The Department of Education said in its statement that it will continue to roll out and update its policies in the coming months as it tries to get the PSLF program back on track.
Given that millions of borrowers could lose student loan forgiveness if they do not apply for the waiver before the deadline, many advocates are urging the White House to extend the waiver option. So far, the Biden administration has not announced any plans to make the new rules permanent.
Correction, January 25th: This article previously stated that private loans would be eligible under the new student loan forgiveness waiver. That was wrong. In addition to direct loans, only FFEL loans — which are federally supported but often issued by private lenders — Perkins loans and other federal loans are eligible for the PSLF waiver.